We got the Budget we deserved

Politics, it might be said, is the art of pretending to do the right thing while maximising your chances of re-election. Jeremy Hunt yesterday proved himself quite the artist; a little tax rise here, a gentle squeeze on allowances there, a pained regret at allowing inflation to do the dirty work for him while telling us how important it is to fight it. This smorgasbord of measures all helped to disguise the central weakness of budgetting today, that there is no appetite for any real attempt to slow down the advance of the state.

The triple lock for pensions is retained, the education, health and social care budgets are increased, energy prices will still be capped after next April, the 2 per cent Defence target remains, the financial disaster that is HS2 will go on destroying wealth. Oh, and the Sizewell C nuclear power station really, really will be built this time.

Somehow, despite all these spending promises, he has convinced the high priests at the Office for Budget Responsibility to endorse his forecasts of cuts almost as large as the tax rises, doubtless in deference to demands from the Tory hardliners to “balance the Budget”. In reality, this is something that only ever happens by accident, and is routinely promised by chancellors for a time well beyond their likely sojourn in the job. To claim that now would stretch credibility to breaking point. The best Hunt could do was to project a national debt falling as a proportion of GDP by 2027. Even that assumes that public spending really can be brought under control.

Yet we should not be too hard on him. Years of calamitous policy decisions, made worse under Boris Johnson, are exacting their grim toll. From post-Brexit intransigence to help-to-buy, from the ruinously expensive pledge of net zero to the manifest absurdity of the triple lock, the errors were clear at the time. The fiasco of Test and Trace was possibly the worst of the lot.

Unfortunately, the years of almost-free money in seemingly unlimited quantities seem to have persuaded the populace that the government can fix everything. Day after day the good causes are paraded on morning radio, all of them asking for more money, while working from home seems to have undermined the way we view work itself.

Cutting public spending, or even trying to decide that it’s for and where the limits might be, would be hard enough in settled times. With the public sector unions preparing to fight to prevent yet more cuts to their members’ wages, it is probably impossible. Hunt said he was racing into the economic storm. On this showing, and on this Pollyanna arithmetic, he is running before it.

Read-through at Vodafone

It’s jolly tough running Vodafone, the incredible shrinking mobile phone operator. Never mind the competition in the UK (three others, including 3) look at the debt mountain. This was self-imposed 23 long years ago, in what was then Europe’s biggest-ever takeover, of Mannessmann of Germany. Bizarrely, it seemed like a good idea at the time, and Voda shares rose the dot-com wave to 440p, becoming the UK’s most valuable quoted company.

It’s been downhill ever since, and this week’s figures were greeted by a raspberry down the line, as the share price fell below £1 for the first time. Nick Read, promoted from finance director to CEO, described the results as “resilient” and claimed that his dealmaking would “improve returns at pace.” Let’s hope so. History is not on his side. A year ago, new into the job, he told us Voda was “structured for value creation.”

He has created value, but unfortunately not for the shareholders. Perhaps reflecting his promotion, his pay added £700,000 to the previous reward, taking it to £4.2m. Read is not alone with the multi-million pound comfort blanket shielding him from the reality of hard times. Chief executives – and by extension, their lieutenants – are routinely awarded life-changing sums which seem to bear no relation to how good a job they do. The old adage that if a good management takes on a bad company, the company will win, is undoubtably true, but they all seem to get vast rewards, whatever the outcome.

A study from the London School of Economics describes this as a market failure, entitled: If you’re so ethical, whey are you so highly paid? It concludes “When it comes to senior executive rewards, for too long companies have behaved as if they are in the equivalent of an arms race. It is a mad, bad system, and it needs to change if inflation in executive pay is to be brought under control.”

This is hardly a new complaint. Executive pay parted company with the rest of us years ago, and has been rowing briskly away from the wage-slave rabble ever since. In theory, the pages of bonuses, option awards, relative performance and other incentives that festoon annual reports are designed to align the interests of shareholders with those of the executives, but no non-exec would survive long on the board if she tried to enforce that.

There is little dispute that the remuneration model is broken, but much less agreement on how to fix it. Meanwhile, the likes of Read can go on spouting corporate rubbish and, doubtless, look forward to another seven-figure payday this year.

A three-pipe problem

A year ago, when shares in British American Tobacco cost a little more than £25 each, I wrote here that the dividends the company was paying were wasted on the shareholders. Despite the company’s excellent record of paying out ever larger amounts, the share price never seemed to respond, and the yield at the time was over 8 per cent. Rather than keep paying, the BAT boys should buy in the shares for cancellation.

If they did so and the price remained at £25, the money would buy almost all the shares in issue in less than a decade, I would be the last shareholder left, and thus the owner of this magnificent money-making business. Alas, not long after, some other investors decided that they would brave being treated as social pariahs and started buying tobacco shares. The BAT price is now over £32. The yield is still 6.8 per cent, as the payout has been raised.

This week’s Spectator magazine boasts a full-page ad entitled “Working towards a smoke fee 2030”. After wibbling on about the need for bold and decisive leadership, the author unveils a checklist “to reduce national smoking rates to below 5 per cent.” He concludes that “there is no time to waste” if we are to meet this arbitrary target in eight years’ time.

So who is behind this propaganda? No, not some anti-smoking fanatic but David Waterfield, who describes himself as area director of BAT north-western Europe area. He works for BAT! He is spending my money to discourage sales of his primary product! David, we know smoking is unhealthy, and it kills you if you try hard enough, but a smoke-free 2030 smacks of a fascist state. There are plenty who would love to impose it, so if you feel that strongly, perhaps you should go and join them.

Write to us with your comments to be considered for publication at letters@reaction.life